The Value in Payments: Forces Driving Commercial Card Adoption

The Value in Payments: Forces Driving Commercial Card Adoption

Eighty years ago a group of major airlines implemented the first commercial cards. Since then, cards have evolved from addressing expenses for travelling employees to eliminating friction across the business-to-business (B2B) financial supply chain. Banks are collaborating with B2B fintech firms to deliver innovative procure-to-pay solutions, bringing consumer digital experiences into traditional procurement, finance, and treasury processes.

Contributing to the adoption of commercial cards are four forces: working capital optimisation, regulatory and compliance, fraud and control, and technology and innovation.

The benefits of commercial cards differ according to business need: enhance expense management, digitise the procure-to-pay process, streamline payables, and improve cash flow. Where companies once used corporate cards exclusively for employee travel expenses, those firms now rely on cards primarily for purchasing goods and services, as evidenced by purchasing card spend growing over 900% since the 1990s. However, purchasing cards only represent a sliver of all global commercial flows and have the potential to become even more of an indispensable tool in the treasury/procurement toolbox.

As corporate treasurers prioritise working capital management during challenging economic times, commercial cards can defer payments while offering early payment to suppliers. Card programmes help to standardise processes and controls, improving safeguards and standards. Cards offer a range of controls, and other protections to increase security and control. Administrative dashboards and analytics technology support detailed transaction data with merchant category codes, unlock opportunities for supplier negotiation, and promote processing cost savings.

As discussed in the new Celent report “The Value in Payments: Forces Driving Commercial Card Adoption," incorporating cards into your overall working capital and payments strategy ensures an integrated approach across payment types and digital channels. Further integration arises from detailed transaction reporting and analytics flowing into treasury, procurement, and other financial management systems. Corporates need tailored, customised card solutions, developed in collaboration with their banking partners. The right bank can deliver a full suite of payment options across a firm’s geographic footprint, adapting and customising the programme in line with your company’s objectives. This report is the seventh in an ongoing series of reports commissioned by HSBC and written by Celent as part of the HSBC Corporate Insights program.

The Expanding Role of the Corporate Treasury

The Expanding Role of the Corporate Treasury

The Association for Financial Professionals (AFP) recently published its 2017 AFP Strategic Role of Treasury Survey supported by Marsh & McLennan Companies’ Global Risk Center.  The survey confirms that treasurers’ roles in most organizations are expanding, with their departments increasingly called on to support the execution of corporate strategy. Many now serve as strategic advisors across their organizations, taking on diverse responsibilities such as long-term borrowing, investing, payments strategy and execution, and counterparty risk analysis and enterprise risk management. The key reason behind treasury’s strategic role? Senior management’s focus on liquidity and risk exposures, along with the call to improve cash management and forecasting.

The report analyses how treasury’s level of maturity impacts how well it can serve as a strategic partner to an organization, the C-suite and Board. To help organizations gauge the level of maturity of their treasury function, AFP and other treasury experts developed a treasury maturity model which defines five stages of maturity:

Technology and automation are enabling treasurers to focus on higher value-added work. But nearly half of respondents either disagree or are noncommittal about whether technology is being used effectively by their organization’s treasury to manage risk and increase its contribution to an organization overall. Organizations positioned on the farther (more mature) end of the maturity spectrum are using technology more effectively than are those at the other end.

Strategic banking partners can help companies ensure they have the treasury technology tools to accurately forecast cash positions, assess capital allocation, and manage financial risk. Banks that provide integrated liquidity and investment platforms can also help treasurers reduce borrowing costs, hit liquidity targets, and increase risk management effectiveness through automation and digitization.

The road to an advanced treasury operation is a journey and these survey results can help develop a roadmap for treasury’s continued evolution. If you are a corporate banker or treasury management professional, I highly recommend a reading of the The 2017 AFP Strategic Role of Treasury Survey.

Robots Offer Helping Hand to Fraud Investigators

Robots Offer Helping Hand to Fraud Investigators

Banks continue to be plagued by extremely high false positives. (They report anywhere between 75% and 90% false positive rates across their fraud and AML transaction monitoring systems.) False positives trigger alerts that then have to be resolved by fraud investigators. It is long standing and frustrating problem. Treating false positives, which in essence are low level alerts, require daily repetitive work by highly specialized employees. For each alert, the investigator has to toggle across multiple internal and external sites copying and pasting links and taking screen shot of information as evidence. It is a humdrum and error prone task. And, more crucially, it takes valuable time away from the investigation of high risk alerts.

So it’s good to see yesterday’s press release from @NICE_Actimize introducing robotic process automation (RPA) into the world of financial crime investigations. Actimize has integrated RPA into its case management solution. The solution deploys attended and unattended robots onto the investigators' screens to automate routine tasks involved in resolving alerts and cases.

I must note that @Pegasystems offers an RPA solution for repetitive back office processes for fraud resolutions. Several other vendors have RPA for financial case management on their roadmaps. However, it is far from being a mainstay of a bank’s financial crimes technology stack.

RPA is a low cost technology that has the potential to substantially increase the productivity and accuracy of AML and fraud investigations. Actimize’s ambitious goal is to potentially increase investigator productivity up to 50%. Whatever the percentage, the end result should be that investigators have the wherewithal to be proactive in the deterrent of suspicious activities.

It is not a stretch for banks to deploy RPA together with machine learning and natural language processing to automate not only repetitive tasks but to carry out simple, judgment-based tasks in the resolution of cases or filing of SARs/CTRs.

Actimize’s solution offers both attended and unattended robots. Attended robots are accessed by a tab on the investigator’s screen and, when required by the investigator, can support their daily tasks. Unattended robots are deployed in the background to quietly and quickly complete predefined routine tasks.

Unattended robots can perform checks on the queue of alerts to ascertain which alerts can be closed without exceptions. In most banks this can be up to 50% of the alerts in the queue. An unattended robot can automatically call or message the customer for further information and perform the process fulfillment activities of the outcomes of investigations such as issuing a new card or sending a letters.

Attended robots can be used on demand for such tasks as copying and pasting or navigating between systems and screens to help the investigator complete the evidence gathering processes.

As banks focus on operational efficiencies across risk platforms, it seems to me that Actimize’s goal is doable.

 

Internet of Things: Why Banking and Payments Professionals Should Care

Internet of Things: Why Banking and Payments Professionals Should Care

There is little doubt that Internet of Things (IoT) is transforming many industries, from manufacturing to insurance. Celent's Insurance practice has been at the forefront of IoT research since 2014 and has published many insightful reports. At first glance, IoT’s impact on banking is less obvious. And yet, in a new research report published this week, Payments and the Internet of Things: Opportunities and Challengeswe assert our belief that IoT also matters for banking, and especially for the payments industry.

At Celent, we have been writing about “contextual commerce” — taking shopping to customers wherever they are (e.g., ordering something directly from a social media platform rather than a merchant’s site). IoT takes contextual commerce to an entirely new level.

We believe it is helpful to think about the IoT evolution in terms of three large stages of development – see the figure below. Each of these stages represents a qualitative step up in the complexity of how transactions are conducted and what is required of payments.

Wearables and objects with user interface (e.g. a fridge with a screen or an Amazon Dash button) allow customers to place orders and pay in ways other than a plastic card or a computer screen. But the customers are still in control – they decide what they want to buy, find the goods and services that are right for them, and initiate a purchase transaction. Going forward, we expect connected devices to play an active role in orchestrating a commerce transaction — realising that the user needs something, suggesting where and how those needs can be fulfilled, preparing a transaction, and potentially executing it. Think of a car keeping a parking meter topped up until you finish your meeting. Ultimately, we will see the emergence of semi-autonomous economic agents capable of acting independently, including making and accepting payments, to optimise their own, their owners’, and their clients’ objectives. Think of a self driving car paying other cars to get out of the way if it's passenger is in a hurry.

For the payments industry, IOT poses a number of challenges, but also represents a big opportunity. For Banking more broadly, IOT can also help achieve better customer engagement and improve cross-selling as well risk and collateral management. That is, of course, unless we have a major consumer backlash against technology’s intrusion into their privacy. As always, creating genuine value for customers, rather than doing something just because technology is available, will be what differentiates successful banking IoT propositions from expensive failures.

Celent Banking research clients can download the report here. If you are not a client, but interested in the report, please drop us a line at info@celent.com.

Reflections of Nacha Payments 2017

Reflections of Nacha Payments 2017

Analysts have definite fixed points in our year. For me, one is the spring conference season, and which nearly always includes Nacha Payments, the big US payments conference. I was unable to attend last year, so I was particularly looking forward to returning this year. Indeed, there are groups of people I often only see at the event.

After being away, the first thing was that struck the exhibition floor was now much, much smaller. Not just that the stands were smaller, but there were fewer of them as well. Indeed, no banks had stands (though several had meeting “pods”). I also noticed that, at some point (or perhaps I had never noticed it), Nacha had snuck onto the Payments logo the word Faster. And the floor and conference sessions were abuzz with talk of real-time payments.

This had some interesting side effects.

First, the belle of the ball was The Clearing House, with virtually every conversation I had referencing their real-time solution directly or indirectly. Same Day ACH, by comparison, didn’t come up in a single conversation at all. Even in the few sessions I managed to attend, it was only briefly mentioned.

Second, the number of attendees (by our estimates) was up, though still down on a few years ago (my trip report blog for 2012 reported 2,500 vs. the 1800 this year). The result was a definite buzz, particularly on the exhibition floor, where most vendors reported good activity and good levels of conversation.

Third, the topic of conversation was real-time. If name checks in discussions are a valid, albeit unscientific, measure of which real-time solution will succeed, then The Clearing House is significantly ahead of Zelle, but with no other real-time solution even mentioned. Indeed, there seemed to be surprise that so many solutions were going through the Fed process. Whilst the Fed obviously is respecting confidentiality of those going through the process, the vendors themselves need to be very vocal and visible, or they could find themselves being seen as late to the party. I’m party to a number of the names, but I’ve not seen anything from those organisations at all.

Finally, and most interesting, was the sudden appearance of APIs. In Europe, because of PSD2, for the last couple of years, APIs have been something that banks have to discuss because they will become mandated. Their appearance in the US has quite probably been triggered by some of the international banks, but the types of banks discussing them was much broader. In Europe, APIs and real-time will most likely go hand-in-hand – it’ll be interesting whether that will be the case in the US too.

Next year Nacha Payments is back in San Diego. Given where the real-time adoption will be, it’s likely to be a pivotal moment in the industry. I think that sets up the event to be a must attend event. See you in San Diego!

The Great Filter for Digital Challengers

The Great Filter for Digital Challengers

It seems like almost weekly I’m hearing something about a new challenger or digital-only bank brand.  The velocity of news is substantial, but despite years of hype, it seems this class of institution is still largely treading water.

It reminds me of The Fermi Paradox.

The paradox was originally posed as a question by the physicist Enrico Fermi about the apparent contradiction between the probability of life in the universe and the complete lack of evidence to support it. With so many supposed earth-like planets, why haven’t we been able to find success stories?

One of the proposed theories is the idea of a Great Filter in the evolution of life.  The theory goes that as life evolves it must overcome leaps in species advancement, one of which is a Great Filter that almost always stops its progress.

In the universe of banking there’s plenty of “new life,” specifically challenger banks looking to compete with traditional institutions (I won’t compare them to advanced species for obvious reasons). Despite major fanfare within the industry, however, these challengers have largely struggled to adapt and grow. Like life in the universe, could there be “great filter” keeping these new entrants from flourishing?  I’d say there are a few contenders.

Technology

What old technology lacks in flexibility it makes up for in stability.  It seems that for emerging providers, what’s made up for in flexibility is lost in stability. Simple, for example, has had its share of technical issues over the past couple of years. In late 2014, a systems upgrade lead to a number of glitches, including bill payment going down, online banking being inaccessible, and the safe-to-spend feature showing incorrect balances.  Some accounts were locked for more than 24 hours.  The transition process to BBVA also presented issues with integration.  Systems had to be rebuilt, and customers had issues with using debit cards, not being US citizens, and just recently, losing their accounts (Simple said it wasn’t able to transfer everyone before its relationship with The Bancorp Bank ended).

Monzo (formerly Mondo) out of the UK had multiple issues inside of a week.  It had outages with its third party card processor, and then a few days later customers reported not being able to properly view their balances or display transactions.

Traditional financial institutions have long known that trust is an asset, whether it’s trust to keep money safe or trust to keep data secure.  Technology has been built around establishing reliability.  Challenger banks and neobanks may be opening themselves up to risks associated with applying concepts of agility to the complexities of banking, and this may be a strong enough filter for reaching critical mass.

Revenue

In addition to trying to provide an amazing customer experience, almost all challenger banks share the same commitment to fee transparency.  In recent years, many traditional banks have used fee income to supplant lower than usual net interest margins.  Fees have been (often rightly) perceived as punitive and opaque.

The quest for fee relief is admirable, but ultimately emerging challengers need to make money to fuel new investments. For some that’s been an issue. The neobank Moven, after struggling to find a significant core audience in the US or overseas, decided to pivot and start selling its underlying front-end technology to traditional banks, most notably TD Bank. Customers Bancorp recently put BankMobile up for sale, citing profitability concerns stemming from limitations on debit interchange once the bank’s assets exceeded $10 billion.  BBVA also recently reported a total of $89.5 million in goodwill impairment from the acquisition of Simple Bank in 2014.

Challenger banks are fully committed to reimagining financial services, but many haven’t yet reimagined the business model. Banks that are furthest along are the likes of Knab in the Netherlands and Fidor Bank in Germany (acquired by France’s BPCE Group) which have applied subscription-based pricing for consumers.  Similar to Netflix or Pandora, the idea is that consumers will pay for value.  What’s clear, however, is that the complexities of financial services require a scale of investment that presents a bigger barrier to entry than for other platform-based offerings (i.e. movies and music).  If consumers are paying for value, then the question is whether a challenger can persuade consumers that they’re receiving enough value to validate a subscription before it begins to hurt its financial viability.

Acquisition

When confronted with barriers to organic growth, some challengers have found it easier to be acquired. When BBVA bought Simple, CEO Josh Reich said that BBVA would provide them with the resources to grow faster.  Many took this as an admission that customer growth was slower than expected. When Fidor was purchased by the French banking group BPCE, the German bank said that the sale would “…allow Fidor to continue its international expansion…” as well as “…improving our overall financial sustainability.”

The question is: do challenger banks need traditional institutions? Well, they certainly need trust, and customers, and data, and  with the pressure to grow and invest in innovation, it’s obvious that the financial incentives of joining a large organization can be attractive.

Challenger institutions have been an important part of the banking ecosystem.  Most notably, they’ve moved the ball forward on what “good” looks like throughout the industry, better assimilating modern concepts of UX and UI design into their front-ends.  At the more extreme end, however, these challengers  were heralded as the white knights that would save consumers from pernicious traditional institutions with outdated technology.  So far that hasn’t been the case.

In the explanation of Fermi’s Paradox, humanity (or a challenger bank) is left with three possibilities, depending on where the Great Filter occurs: we're rare, we’re first, or we’re in trouble. Rare is the challenger that’s made it through the Great Filter.  First is the challenger within a pack of new institutions which has grown because of conditions that have only recently become favorable.  In trouble is the challenger that hasn’t yet reached the Great Filter.  There’s plenty of life in the banking universe, but it remains to be seen who will make first contact.

Finovate Spring: A Focus on the Practical

Finovate Spring: A Focus on the Practical

Finovate Spring 2017 has just finished up in San Jose; go to the Finovate blog at http://finovate.com/blog/ for an official list of the best in show winners. My focus isn’t on individual companies, but rather the broad themes that I picked up from 59 presenters over the course of two days.

Themes

1. Practicality
There were few gee-whiz, wildly futuristic presentations. Practicality ruled: companies focused on improving processes and delivering better outcomes. Solutions weren’t necessarily sexy or mind-blowing, but potentially more useful in terms of delivering reliable if unspectacular results.

2. Employee Efficiency
What’s more practical than making employees more efficient? Very little. Presenters automated processes, improved learning, and took the drudgery and time out of many manual tasks.

3. Artificial Intelligence / Machine Learning
One way to make employees more efficient, and increase that efficiency over time, is through AI technologies like Natural Language Understanding and Natural Language Generation. To improve those, apply machine learning over time.

4. APIs / AsAService
Another way to bring new ideas to market quickly is to tap into others who’ve already built the solutions. APIs are a key way of accessing many of these pre-built products, some of which were offered as a service (think Family Office As a Service, etc.)

5. Customer Experience
In line with what banks have recently been telling us, improving the Customer Experience was top of mind for many customers. Whether making an interface more aesthetically pleasing, eliminating friction, or speeding feedback, a keen focus on enriching interactions was evident throughout the event. I’d point out that the vast majority of solutions focused on the mobile experience, so much so that it almost doesn’t merit its own mention (but, since this didn’t used to be the case, it’s worth being explicit).

Observations

1. The presenting roster was down to 59 companies from 72 last year in San Jose. While more digestible, frankly, it made many observers wonder whether this was an early sign that the fintech frenzy is moderating.

2. Other technologies that didn’t make the headlines but were present include Analytics, Biometrics, and Lending / Mortgages.

3. I’m always interested in the dogs that didn't bark. Two technologies completely absent from the roster: Apple Watch and Blockchain. Others that were surprisingly underrepresented included Voice, Payments, Branch, and Financial Inclusion. As is my practice, I jotted down a few words associated with each presentation; the results are below.

If you’d like to discuss what we say at Finovate, please be in touch and we’ll arrange some time.

Innovation on Display: The 2017 Ford GT and FIS Connect 2017

Innovation on Display:  The 2017 Ford GT and FIS Connect 2017

As sharp-eyed Celent retail banking subscribers know, I'm an avid collector of good analogies.  

I like analogies because they can inject simplicity into the most complex discussions of financial technology, and make abstract concepts become more concrete and accessible to the casual fan of technology.  My favorite and I believe useful analogy for banking system engineering is that of automobile engineering, an industry that has a similarly colorful past and has been marked by fits and starts of innovation over the past 120 years.

Fast forward to 2017 and the launch of the new Ford GT, a modern-day supercar with a heritage dating back to the early 1960s, when the Ford GT40 won the grueling 24 Hours of Le Mans four times in a row.  The new GT has a starting price of $450,000 before options, creating a very exclusive club of future GT owners when production began last December.  The Ford GT showcases Detroit's recent focus on platform engineering — the configuration of common unibody structures and drivetrain components to create unique products that can appeal to disparate customers. 

In the case of the Ford GT, platform engineering has been taken to a new extreme.  Powering this new supercar is a retuned version of the workhorse 3.5L six-cylinder EcoBoost engine that powers the pedestrian Ford Transit commercial van, the Explorer and Expedition SUVs, and the Flex crossover as well as several Lincoln models.  In these applications the engine tops out at 380 horsepower, which is impressive but hardly qualifies for world-class supercar status. 

In the case of the setup for the GT, the same basic EcoBoost engine has been retuned to generate 647 horsepower, enough to propel the GT from zero to 60 miles an hour in just over 3 seconds.  The fact that a single engine — albeit in modified form — can power a $20,000 van and a $450,000 supercar is testament to the power of platform engineering, the new architectural model that is widely used by Detroit today and is largely responsible for driving new innovative models for consumers, and new levels of profitability for the automakers.

The same architectural strategy is being employed by bank technology giant FIS, who held its 2017 FIS client conference two weeks ago in Orlando. 

Most industry observers have focused on FIS’s preoccupation of late with its integration of the SunGard corporate banking and capital markets products with FIS’ existing retail-oriented bank IT solutions.  While this focus is understandable, it has obscured the fact that that FIS continues to drive forward its own platform engineering strategy, an enterprise architecture strategy that will in time allow FIS to capitalize on its position as owner of a large stable of core banking platforms – from the large bank Systematics platform to the Horizon community bank platform, and all bank sizes and markets in between.

As Ford has shown with its 3.5L Ecoboost engine, FIS's long-term goal is to create build-once, deploy-everywhere core banking components that can be configured in various ways to support the need of a small community bank, boutique wealth manager, or a high-scale retail bank.  FIS’s core banking "brands" (Systematics, Horizon, IBS, Profile, etc.) won't be going away anytime soon, but what these solutions look like under the covers will change, as individual silos of code will give way to common enterprise banking system components that align to these brands through differentiated bundles of features, functionality, pricing, and service.

The glue that will connect FIS's collection of existing systems and newer enterprise components is a growing library of system APIs that are catalogued and distributed through a new enterprise API Gateway.  The API Gateway not only offers RESTful services to third-party applications (like an online banking or mobile payment services), but also supports integration between FIS's own individual systems. 

Let's say you're a Miami-based community bank that would like to serve the deposit needs of high-wealth international clients?  You can contract for FIS's flagship outsourced banking solution IBS and pull in foreign currency account functionality through an API call to FIS’s multi-currency Profile core banking system.  Retail delivery systems like branch, teller, and call center would continue to function as they currently do, so from the bank’s perspective it would appear that the old workhorse IBS suddenly developed multi-currency capabilities.

Over time, the old model of a bank licensing a discreet software stack will give way to a menu–driven model in which the bank's precise requirements are met though constructing a composite of functionality from a number of FIS solutions, presented to the bank and its clients through a single UI and providing seamless integration through the API Gateway.  This is FIS's version of Ford's platform engineering strategy, the technique that allows a simple utility van and a $450,000 supercar to be powered by the same basic engine.

By showcasing the API Gateway at the 2017 Connect client conference, FIS has signaled to the market that it has moved from the concept-phase to the implementation phase of its enterprise strategy for core banking systems.  While it will take a number of years before FIS's vision begins to manifest itself through consistent product delivery, the approach makes sense. 

In fact, it makes a LOT of sense.

Through increasingly bold acquisitions over the past 15 years, FIS has established itself as an industry leader primarily in terms of market-share.  What is welcome news is that FIS is apparently not satisfied simply with market leadership, and is seeking to assert newfound technological leadership as well.  The devil is as always in the details, execution is key, and all of the other management truisms apply here, but my instinct is that this can be big, and I wouldn’t bet against them.

Congratulations to All Celent Model Bank 2017 Award Winners!

Congratulations to All Celent Model Bank 2017 Award Winners!

Many of us at Celent just came back from a busy and exciting week in Boston. Undoubtedly, the highlight was attending Celent's Innovation and Insight Day on April 4th, where we celebrated achievements of the Model Bank and Model Insurer award winners.

The rain and clouds couldn't obscure spectacular views from the State Room overlooking the Boston harbour. And they certainly didn't dampen the mood of nearly 300 attendees representing banks, insurers and technology vendors from at least 15 countries around the world.

Craig Weber, Celent CEO, opened the day by presenting compelling evidence that financial services are more important than many celebrities. He was followed by an insightful presentation from Andy Rear, chief executive of Munich Re Digital Partners. The programme then split into parallel Banking, Insurance and Wealth and Asset Management tracks before reconvening again to close with a series of debates between Celent analysts on three topics: Internet of Things, artificial intelligence and blockchain.

During the Banking track we presented Model Bank awards, and discussed the winning initiatives and why they stood out from all others. As regular readers of this blog know, this year we introduced specific named awards with only a single winner for each award. I would like to offer my personal congratulations to all of our Model Bank 2017 winners:

Winner

Award

Alior Bank S.A., Poland

Emerging Technology for Consumers

Banco Original, Brazil

Consumer Digital Platform

Bank of America, USA

Risk Management

BMO Bank of Montreal, Canada

Process Automation

Capital One, USA

Emerging Technology for Businesses

CBW Bank, USA

Banking as a Platform

Citi, USA

Open Banking

Credit Suisse AG, Switzerland

Payments Replatforming

DenizBank, Turkey

Lending Product

Emirates NBD and ICICI Bank, India and UAE

Most Promising Proof-of-Concept

FGB, UAE

Corporate Banking Digital Platform

Idea Bank S.A., Poland

Small Business Digital Platform

India Post, India

Financial Inclusion

IndusInd Bank, India

Fraud Management and Cybersecurity

Millennium BCP, Portugal

Branch Transformation

Mizuho Financial Group, Japan

Consumer Banking Channel Innovation

National Australia Bank, Australia

Core Banking Transformation

OakNorth Bank, UK

Banking in the Cloud

Radius Bank, USA

Product Innovation

The Royal Bank of Scotland, UK

Employee Productivity

YES BANK, India

Payments Product

And of course, congratulations to Caixa Bank, our Model Bank of the Year 2017! The keynote presentation by Àngels Valls on how Caixa Bank has embraced digital was the highlight of the I&I Day for many of us in Banking – thank you! Finally, congratulations to Celent Model Insurer award recipients.

Each of the award winning initiatives is published as a case study and available to Celent research clients by following the links above. In addition, we also published an overall Model Bank 2017 report, which discusses how the Model Bank programme has changed over 10 years and reviews the content themes across all nominations in 2017.

We intend to run the Model Bank programme again later this year, so keep an eye on the announcements when the new submissions window opens. We have no doubt that you are all working on exciting things and hope that you will consider submitting your initiatives for 2018 awards. In the meantime, enjoy the case studies and let's celebrate the Model Bank winners of 2017!

Emerging Innovation in Banking

Emerging Innovation in Banking

Over the past few weeks we have been previewing various content themes we will be discussing at our Insight and Innovation Day in Boston on April 4th. I would like to finish this series of posts by looking at the new Model Bank category we introduced this year – Emerging Innovation.

When we added this category, we weren’t quite sure what to expect, but we certainly hoped to see the banks’ efforts at the “bleeding edge” of innovation. We were very pleased with the number and quality of such nominations, which spanned the gamut of the hottest topics today. Many of these truly outstanding stories are still in relatively early stages, but all are very interesting and pointing to the future of banking.

Model Bank nominations in 2017 showcased the banks’ efforts in the areas at the forefront of innovation in banking:

  • Innovative customer engagement: the most innovative banks go where their customers are; for example, banks are experimenting with ways to engage their customers directly from social media platforms via chatbots and other tools. They are also looking to introduce new channels, such as wearables.
  • Artificial intelligence (AI): Model Bank submissions demonstrated the diversity of AI technologies and their applications:
    • Driving a virtual agent capable to have a written exchange with the customer via a chatbot, or to even hold a verbal conversation on the phone.
    • Powering a robot to support customer engagement in physical branches.
    • Deployed behind the scenes as a tool to help the customer service agents.
    • Helping determine the best marketing offer for the customer.
  • Biometrics: banks are stepping up their efforts to deploy biometric authentication in their bid to provide customers more convenience while ensuring security. They are expanding beyond fingerprints and are experimenting with other modalities such as facial and voice biometrics. And it’s also not just for consumers – banks are beginning to use biometrics in the corporate banking context as well.
  • APIs: we already spoke about APIs when describing Open Banking, but want to highlight this again, given the importance of APIs. While banks in Europe must open up because of regulation, leading banks around the world are not waiting for the regulators and are starting to provide API-based access to their services to others. And some banks are pursuing a “marketplace banking” strategy seeking to position themselves as a banking platform in the centre on which third parties can build a myriad of discrete services. 
  • Blockchain: given how many banks have started exploring blockchain and other distributed ledger technologies, we were hoping to see some nominations describing their efforts in this space. We were not disappointed and received initiatives ranging from collaborative efforts around cross-border payments and trade finance to “solo” efforts of a single bank using blockchain to manage employee incentives.

We will be discussing all these topics and more at our Insight and Innovation Day next week. It is also the time when we announce and award all the Model Bank winners, including our Model Bank of the Year. We are in the final stages of preparation and are very excited! The event has been sold out for weeks, so if you haven't yet registered you might be too late… If you have registered, we are looking forward to welcoming you there, although if your plans have changed, please let us know so that we could invite those on the waiting list. See you in Boston!